Vietnamese firms are taking advantage of regional tax reductions to boost exports to ASEAN

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According to the General Statistics Office (GSO), in 2016, Vietnam’s export turnover to the ASEAN region was US$17.45 billion, down 4.4% year-on-year. However, the figure rose to US$21.7 billion in 2017, up 24.5% year-on-year. In the first six months of 2018, the figure hit US$12.2 billion, up 17.4% year-on-year.

"Vietnam’s exports to other ASEAN markets have risen significantly. This is not only due to foreign firms in Vietnam, but also Vietnamese ones that have been boosting their exports to ASEAN markets,” said a representative from the Ministry of Industry and Trade at a recent meeting between the government and localities in Hanoi. "This has been thanks to slashed import tariffs, coupled with enterprises’ improved awareness about ASEAN markets.”

According to the ASEAN Trade in Goods Agreement which took effect in 2010, Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand removed almost all of their import tariffs in 2010. Cambodia, Laos, Myanmar, and Vietnam had to erase 90% of their tariff lines by 2015, and raise that number to 97.81% by 2018.

Nguyen Van Manh, sales representative from farm produce firm Clean Food Co., Ltd., a Vietnam-China joint venture, said that if his firm directly exports its products from China to ASEAN countries, it would face an average import tax rate of 7-10%, but when the firm does the same from Vietnam, it enjoys the far lower import tax rate of just 2-3%, which will be totally removed by 2018.

Since early last year, Clean Food has been exporting fruit products to Malaysia and Singapore, with turnover rising 20-25% year-on-year. The firm is planning to expand its exports to other regional markets such as Thailand, Myanmar, the Philippines and Indonesia in the future.

In mid-May 2018, Manh flew to Thailand, Myanmar and Indonesia to sign several export contracts worth a total of US$6 million.

At present, Vietnam’s major ASEAN importers include Thailand, Malaysia, Singapore, Indonesia, and the Philippines.

According to the General Department of Customs of Vietnam, in the first five months of this year Vietnam earned US$2.2 billion from exporting its goods to Thailand; US$1.66 billion from Malaysia, US$1.33 billion from Singapore, about US$1.6 billion from Indonesia, and US$1.2 billion from the Philippines.

Last year, Vietnam raked in US$4.7 billion from exporting its goods to Thailand (up nearly 30% year-on-year), US$4.2 billion from Malaysia (up 31% year-on-year), about US$3 billion from Singapore (up over 30% year-on-year), about US$2.5 billion from Indonesia, and US$1.1 billion from the Philippines.

The GSO also reported that in the first half of this year, Vietnam suffered a US$3.1 billion trade deficit with ASEAN. Last year, the country held a US$6.3 billion trade deficit with ASEAN, lower than 2016’s US$6.8 billion. The country has also seen a deficit with Thailand, Malaysia, Singapore, Indonesia, and the Philippines.

Vietnam has been a net importer of many items from ASEAN which are indispensable for local production, such as petrol, plastics, and components for computers, electronics, machinery, and steel. Vietnam imports these items for its production thanks to the slashed import tariffs, and then exports finished products to the world, including ASEAN markets. As a result, there is no real reason to be worried about the trade deficit between Vietnam and ASEAN.